Health Care Reform Provides Some Good News for Early Retirees
In my previous post, Health Care Reform: Don't Count on Retiring Early, I showed that people retiring before age 65 (the eligibility age for Medicare) may still face high costs for medical insurance, even after passage of health care reform. However, health care reform does provide some good news for early retirees who don't have affordable retiree medical insurance through their employer. Let's take a look.
Starting in 2011, the following provisions take effect for individually purchased or group insurance plans:
- Bans on lifetime dollar limits on essential health benefits
- Restrictions on annual dollar limits for essential health benefits
- Bans on rescinding coverage, except in cases of fraud
- No preexisting exclusions for children under age 19
- Dependent coverage that can be extended up to age 26 for children ineligible for other employer coverage.
Keep in mind, however, that banning the above restrictions will most likely increase premiums. By how much is unclear, since until now, insurance companies have used these provisions to manage the claims they pay and keep premiums as low as possible.
Starting in 2014, the ban on pre-existing exclusions is extended to everyone. In addition, employers with 50 employees or more will be required to offer adequate and affordable medical insurance to workers or face substantial penalties. This provision will help individuals who Do the Downshift -- retire from their main career but continue working during their retirement years -- at jobs that otherwise might not offer health insurance.
From the perspective of an early retiree, the above features are definitely several steps in the right direction. But many early retirees will still be paying substantial amounts of money for premiums and out-of-pocket expenses. Anybody considering early retirement should do the math before they retire to see if they'll have enough income to cover their medical premiums and expenses.
Health care reform is complicated, and many details will be specified in future regulations. For example, how will the term "adequate and affordable" medical insurance be defined? Stay tuned over the next few years as we learn more about health care reform and as additional regulations clear up the uncertainties.
Steve Vernon
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Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops
and authored Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.
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